Residential solar, despite being a relatively young industry, has faced numerous challenges throughout its two-decade existence. Shifting regulations, such as the policy update in California last year, have extended the time it takes for homeowners to recoup their investments. However, the industry itself also poses unique obstacles. With its labor-intensive nature and fragmented structure, it has been resistant to automation. The largest installer, Sunrun, holds just a 13% market share.
Lee Kesheshian, founder and CEO of Civic Renewables, describes the residential solar industry as a “solar coaster” that is even more volatile than other service industries. The experience for customers can vary greatly depending on the smaller company they choose for installation. Civic Renewables aims to address this issue by acquiring these smaller installers and consolidating them under its umbrella organization.
Kesheshian acknowledges that these smaller installers are skilled construction workers but may lack proper bookkeeping practices or rely on personal lines of credit to keep their businesses afloat. Civic Renewables aims to alleviate these concerns by allowing the acquired companies to focus on their core strengths while providing back-office support such as human resources, finance, and procurement. Additionally, the company will offer training for new employees, initially for solar installations and potentially expanding to include other services like heat pumps.
For Kesheshian, the workforce component is crucial to Civic Renewables’ strategy. By entering markets that have not traditionally embraced solar energy and providing job opportunities, the company believes it can drive change and promote solar adoption.
Interestingly, improving profitability for Civic Renewables does not revolve around increasing headcount but rather finding ways to accelerate the growth of each business while benefiting from economies of scale. The company has already acquired Green Rack Solar in Pittsburgh and Ipsun Solar in Fairfax, Virginia. Kesheshian envisions purchasing two more installers this year and focusing on the Mid-Atlantic and Midwest regions.
Civic Renewables is supported by GEF Capital Partners, a private equity firm specializing in climate tech, conservation, and sustainability. While GEF has initially invested a few million dollars to kickstart Civic Renewables, the company aims to be self-sustaining in underwriting future acquisitions. GEF’s plan is to grow Civic Renewables to generate around $30 million worth of earnings before interest, tax, depreciation, and amortization (EBITDA), making it an attractive asset for potential investors.
The business plan of Civic Renewables could serve as a blueprint for other segments of the climate tech market. While automation garners significant attention, the decarbonization efforts will heavily rely on skilled labor that cannot be easily replaced. The trades industry still offers substantial opportunities and financial potential.